Advantages Of Single Product Economy

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Less developed countries, such as African countries, largely depend upon single primary commodities for economic growth. There are several drawbacks to such a reliance on a primary product for the growth of the economy (Stein 1970: 607). Such economies are not able benefit from comparative advantage, due to the inability to direct resources towards other sectors, such as industry, with a greater potential for growth (Stein 1970: 611). According to Nafziger (2006: 611), less developed countries are “vulnerable to declining terms of trade due to the inability to shift resources to accommodate shifting patterns of comparative advantage”. Additionally, manufacturing exports are produced at a much faster rate than primary products. Therefore, through the reliance solely on primary products, African economies do not experience such growth, as it would if it were also diversified into the manufacturing sector a well (Stein 1970: 615).

Another drawback of a single primary product economy is that the state would import the products that it does not produce domestically. As such, import requirements increases faster than their export of primary products (Kaldor 1964: 491). Furthermore, if any competitor decreases their price in a primary product, it forces other producers to do the same leading to a devaluation of the product affecting growth (Kaldor 1964: 499). Furthermore, Kaldor (1964: 491) states that in some of these African economies would depend on external aid to finance

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